Oil giant BP is to sell its upstream businesses and associated interests in Venezuela and Vietnam to TNK-BP for a $1.8bn. TNK-BP, Russia's third largest oil company, is owned equally by BP and the AAR consortium, which is comprised of Alfa Group, Access Industries and Renova. The agreement covers BP's interests in the Petroperijá, Boquerón and PetroMonagas joint ventures in Venezuela and, in Vietnam, BP's 35% operating interest in the Lan Tay and Lan Do gas fields and associated pipeline and power generation interests. BP's net booked reserves associated with all these assets total some 270 million barrels of oil equipment. The disposal is all part of BP's previously announced plan to raise $30bn through asset sales by the end of 2011, as it seeks to boost the contingency fund for financial obligations relating to the Gulf of Mexico oil spill. Since setting the $30bn target in July 2010 the company has raised $8.9bn, not including the $1.8bn for the transfer of assets to TNK-BP. Bob Dudley, recently appointed chief executive officer of BP, described the assets the company is selling as "robust businesses which offer both existing production and potential opportunities for future growth." "We believe they will offer TNK-BP a solid foundation as it builds its business outside Russia," Dudley added. Mikhail Fridman, chief executive officer of TNK-BP concurred with Dudley's view. "Given Russia's strong relationships with Vietnam and Venezuela, we are sure that this transaction will create significant value both for TNK-BP and our local partners," Fridman said. BP will retain an economic interest in these assets through its 50% stake in TNK-BP.
The agreement does not affect BP's other business activities in Vietnam, including a significant lubricants blending and marketing business, nor in Venezuela.
Monday, October 18, 2010
Tuesday, June 22, 2010
Fixed-rate mortgage offers a safe haven
Interest rates on a number of fixed-rate home loans are currently lower than the variable rates of about 7.4 per cent that are being offered by many lenders.
With the prospect that interest rates will go higher over the next 18 months, the question of whether to fix all or some of the borrowing should be accorded serious consideration.
Advertisement: Story continues belowWith signs of mortgage stress growing, borrowers need to make sure they are taking every opportunity to manage their debt burden efficiently.
Right now the best opportunity may lie in taking advantage of highly competitive fixed rates.
The financial services analyst for Infochoice, David Lalich, says most of the changes are to two- and three-year rates.
The best two-year fixed rates are below 7.2 per cent, which is competitive with a number of lenders' variable rates. The most competitive are RAMS, the Bank of Queensland, HSBC, Nationwide Mortgage and Commonwealth Bank.
Borrowers can have three-year rates below 7.5 per cent from RAMS, Heritage Building Society, Westpac, National Australia Bank, Better Option Home Loans and Greater Building Society.
Fixed-rate loans usually cost more than variable rates because the borrower is paying a premium for certainty.
It is like an insurance policy, whereby the borrower pays the bank for taking over the interest rate risk.
At the moment, that premium is very low, which reduces the chances of becoming locked into a rate that could very well become unattractive a couple of years down the track.
Part of the fixed-or-variable debate has to be a consideration of where interest rates are headed.
The Reserve Bank's decision to hold off on a rate rise this month, combined with concerns that the European sovereign debt crisis is the beginning of GFC II, might lead people to think that the Reserve has taken further rate increases off its agenda.
Bank economists say it would be a mistake to think that way. All of them are forecasting higher rates later this year and throughout 2011.
ANZ forecasts that the official cash rate will rise from its current level of 4.5 per cent to 4.75 per cent in the September quarter and then to 5 per cent by the end of the year.
It expects the Reserve to have pushed cash rates to 5.5 per cent by June next year. Westpac's latest forecast is for the cash rate to hit 5 per cent by the end of the year and to reach 5.5 per cent by September next year.
The Commonwealth Bank is more bearish. It expects the cash rate to be 5 per cent by the end of the year and 6 per cent by the end of 2011. Its view is that the strength of the Asian economy is the real determining factor for Australian monetary policy, not what is happening in Europe.
The National Australia Bank has a similar view. It is forecasting a cash rate of 5.25 per cent by the end of the year and 6 per cent by the end of 2011.
Its latest commentary says: "The key driver of our upward forecast is the additional income generated by sharply higher forecasts for the terms of trade - up 18 per cent over 2010. That, in turn, flows over into additional investment, profits and consumption."
Mortgage market data from a number of sources over the past couple of weeks shows an increase in the take-up of fixed-rate home loans.
Such loans made up 3.26 per cent of the Mortgage Choice approvals in May, compared with 1.77 per cent in April.
The Australian Bureau of Statistics' housing finance data shows fixed-rate loans dropped from a peak of 8 per cent of all dwellings financed in June last year to a low of 2.1 per cent in February and March. There was a pick-up to 2.4 per cent in April.
The head of macro markets at AMP Capital Investors, Simon Warner, says fixed-rate loans are at attractive levels: "Some of them are lower now than when the Reserve Bank started putting rates up last year. This is definitely an opportunity for borrowers," he says.
"It is hard to see them going any lower than they are now. Some big economic issue would have to come into play for that to happen. If I were a risk-averse borrower, I would be locking in."
Most borrowers do take a risk-averse approach to their borrowings.
The deputy governor of the Reserve Bank, Ric Battellino, said in a speech in Sydney this month that half of all home loan borrowers have been ahead of schedule on loan repayments in recent months.
He says the current arrears rate on home loans is 0.7 per cent, which has increased over the past couple of years but is one of the lowest levels of non-performing loans among the developed economies.
However, there is also plenty of evidence that borrowers are getting into trouble.
Westpac reported in May that the number of mortgage customers in its hardship assistance program (people who have approached the bank to have their repayment terms varied because they are in financial difficulty) had doubled since September.
According to the most recent Fujitsu Consulting Mortgage Stress-O-Meter, released in March, the number of severely stressed households (those facing a forced sale) has risen this year as a result of higher interest rates.
Borrowers tend to shy away from fixed rates for several reasons. They are inflexible, providing no opportunity for additional repayments, offsets or redraws.
Borrowers risk being locked into a rate that ends up being higher than the variable rate if rates start to fall; and if borrowers want to get out of a fixed-rate loan they are required to pay high break costs. Break fees are set as a percentage of the loan amount or several months' interest payments. Whichever way they are calculated, they can cost thousands of dollars.
The Reserve has reported that bank-fee income on home loans increased by 17 per cent last year. In its report on fees, the Reserve says: "The available information suggests that break fees on fixed-rate loans accounted for a significant proportion of the overall growth in fees."
One lender is hoping to offer the best of both worlds with the launch of a capped-rate loan.
Opportune Home Loans has a loan with a starting rate of 7.04 per cent and a cap of 7.49 per cent for the first two years. The managing director of Opportune, Paul Ryan, says borrowers are put off fixed-rate loans because they are inflexible. "A capped-rate loan gives borrowers that flexibility with some security," he says.
With the prospect that interest rates will go higher over the next 18 months, the question of whether to fix all or some of the borrowing should be accorded serious consideration.
Advertisement: Story continues belowWith signs of mortgage stress growing, borrowers need to make sure they are taking every opportunity to manage their debt burden efficiently.
Right now the best opportunity may lie in taking advantage of highly competitive fixed rates.
The financial services analyst for Infochoice, David Lalich, says most of the changes are to two- and three-year rates.
The best two-year fixed rates are below 7.2 per cent, which is competitive with a number of lenders' variable rates. The most competitive are RAMS, the Bank of Queensland, HSBC, Nationwide Mortgage and Commonwealth Bank.
Borrowers can have three-year rates below 7.5 per cent from RAMS, Heritage Building Society, Westpac, National Australia Bank, Better Option Home Loans and Greater Building Society.
Fixed-rate loans usually cost more than variable rates because the borrower is paying a premium for certainty.
It is like an insurance policy, whereby the borrower pays the bank for taking over the interest rate risk.
At the moment, that premium is very low, which reduces the chances of becoming locked into a rate that could very well become unattractive a couple of years down the track.
Part of the fixed-or-variable debate has to be a consideration of where interest rates are headed.
The Reserve Bank's decision to hold off on a rate rise this month, combined with concerns that the European sovereign debt crisis is the beginning of GFC II, might lead people to think that the Reserve has taken further rate increases off its agenda.
Bank economists say it would be a mistake to think that way. All of them are forecasting higher rates later this year and throughout 2011.
ANZ forecasts that the official cash rate will rise from its current level of 4.5 per cent to 4.75 per cent in the September quarter and then to 5 per cent by the end of the year.
It expects the Reserve to have pushed cash rates to 5.5 per cent by June next year. Westpac's latest forecast is for the cash rate to hit 5 per cent by the end of the year and to reach 5.5 per cent by September next year.
The Commonwealth Bank is more bearish. It expects the cash rate to be 5 per cent by the end of the year and 6 per cent by the end of 2011. Its view is that the strength of the Asian economy is the real determining factor for Australian monetary policy, not what is happening in Europe.
The National Australia Bank has a similar view. It is forecasting a cash rate of 5.25 per cent by the end of the year and 6 per cent by the end of 2011.
Its latest commentary says: "The key driver of our upward forecast is the additional income generated by sharply higher forecasts for the terms of trade - up 18 per cent over 2010. That, in turn, flows over into additional investment, profits and consumption."
Mortgage market data from a number of sources over the past couple of weeks shows an increase in the take-up of fixed-rate home loans.
Such loans made up 3.26 per cent of the Mortgage Choice approvals in May, compared with 1.77 per cent in April.
The Australian Bureau of Statistics' housing finance data shows fixed-rate loans dropped from a peak of 8 per cent of all dwellings financed in June last year to a low of 2.1 per cent in February and March. There was a pick-up to 2.4 per cent in April.
The head of macro markets at AMP Capital Investors, Simon Warner, says fixed-rate loans are at attractive levels: "Some of them are lower now than when the Reserve Bank started putting rates up last year. This is definitely an opportunity for borrowers," he says.
"It is hard to see them going any lower than they are now. Some big economic issue would have to come into play for that to happen. If I were a risk-averse borrower, I would be locking in."
Most borrowers do take a risk-averse approach to their borrowings.
The deputy governor of the Reserve Bank, Ric Battellino, said in a speech in Sydney this month that half of all home loan borrowers have been ahead of schedule on loan repayments in recent months.
He says the current arrears rate on home loans is 0.7 per cent, which has increased over the past couple of years but is one of the lowest levels of non-performing loans among the developed economies.
However, there is also plenty of evidence that borrowers are getting into trouble.
Westpac reported in May that the number of mortgage customers in its hardship assistance program (people who have approached the bank to have their repayment terms varied because they are in financial difficulty) had doubled since September.
According to the most recent Fujitsu Consulting Mortgage Stress-O-Meter, released in March, the number of severely stressed households (those facing a forced sale) has risen this year as a result of higher interest rates.
Borrowers tend to shy away from fixed rates for several reasons. They are inflexible, providing no opportunity for additional repayments, offsets or redraws.
Borrowers risk being locked into a rate that ends up being higher than the variable rate if rates start to fall; and if borrowers want to get out of a fixed-rate loan they are required to pay high break costs. Break fees are set as a percentage of the loan amount or several months' interest payments. Whichever way they are calculated, they can cost thousands of dollars.
The Reserve has reported that bank-fee income on home loans increased by 17 per cent last year. In its report on fees, the Reserve says: "The available information suggests that break fees on fixed-rate loans accounted for a significant proportion of the overall growth in fees."
One lender is hoping to offer the best of both worlds with the launch of a capped-rate loan.
Opportune Home Loans has a loan with a starting rate of 7.04 per cent and a cap of 7.49 per cent for the first two years. The managing director of Opportune, Paul Ryan, says borrowers are put off fixed-rate loans because they are inflexible. "A capped-rate loan gives borrowers that flexibility with some security," he says.
Monday, June 7, 2010
Portugal PM says budget on track to meet 2010 goals
The performance of Portugal's public accounts in the first five months of 2010 should ensure it meets its budget deficit goal for the year as a whole, Prime Minister Jose Socrates told parliament on Friday.
"Between January and May the truth is that performance of the budget gives us comfort and security to guarantee that our budget goals for this year are met," he told parliament.
The country has a target to cut the budget deficit to 7.3 percent of gross domestic product this year from 9.4 percent in 2009.
Socrates said revenues between January and May had risen 4.7 percent, 3.5 percent higher than planned.
"The truth is that we already have indicators, which are still provisional, of revenues between January and May and these indicators are very positive," he said.
Portugal announced last month additional savings of 2 billion euros in the budget, through higher taxes and wage cuts for well-paid civil servants, to speed up reductions in its budget deficit in order to stave off being engulfed by the euro zone debt crisis.
The higher income and value-added tax levels will go into effect in July, after which government revenues should rise further.
Socrates' Socialist government has promised to cut the budget deficit further to 4.6 percent of GDP in 2011 and to 2.8 percent in 2013.
"Between January and May the truth is that performance of the budget gives us comfort and security to guarantee that our budget goals for this year are met," he told parliament.
The country has a target to cut the budget deficit to 7.3 percent of gross domestic product this year from 9.4 percent in 2009.
Socrates said revenues between January and May had risen 4.7 percent, 3.5 percent higher than planned.
"The truth is that we already have indicators, which are still provisional, of revenues between January and May and these indicators are very positive," he said.
Portugal announced last month additional savings of 2 billion euros in the budget, through higher taxes and wage cuts for well-paid civil servants, to speed up reductions in its budget deficit in order to stave off being engulfed by the euro zone debt crisis.
The higher income and value-added tax levels will go into effect in July, after which government revenues should rise further.
Socrates' Socialist government has promised to cut the budget deficit further to 4.6 percent of GDP in 2011 and to 2.8 percent in 2013.
Monday, May 24, 2010
Cars and auto parts help drive retail sales
OTTAWA—Retail sales increased for a fourth straight month in March, rising 2.1 per cent to $37 billion.
Statistics Canada reports the gain was largely due to higher sales at motor vehicle and parts dealers.
Sales by volume rose 2.2 per cent as retail continued an upward trend that began this year.
Sales increased in 8 of 11 retail subsectors in March and all provinces recorded increases.
The largest contributor to the overall increase was a 3.6 per cent rise at motor vehicle and parts dealers, powered by a 5.5 per cent rise at "other" motor vehicle dealers (motor homes, motorcycles and recreational watercraft).
Automotive parts, accessories and tire stores enjoyed a 4.6 per cent gain while sales at new car dealers rose 3.5 per cent and gas stations were up 2.3.
Sales at building material and garden equipment and supplies dealers increased 6.6 per cent.
Clothing and clothing accessories stores were up 4.4 per cent.
Sales at sporting goods, hobby, book and music stores rose 3.1.
Food and beverage stores edged down 0.1 per cent in March, due primarily to a 4.7 per cent decline at beer, wine and liquor stores.
Retail sales declined for a second consecutive month at furniture and home furnishing stores, falling 0.9 per cent in March.
Newfoundland and Labrador had the highest growth rate among the provinces at 3.1 per cent.
Statistics Canada reports the gain was largely due to higher sales at motor vehicle and parts dealers.
Sales by volume rose 2.2 per cent as retail continued an upward trend that began this year.
Sales increased in 8 of 11 retail subsectors in March and all provinces recorded increases.
The largest contributor to the overall increase was a 3.6 per cent rise at motor vehicle and parts dealers, powered by a 5.5 per cent rise at "other" motor vehicle dealers (motor homes, motorcycles and recreational watercraft).
Automotive parts, accessories and tire stores enjoyed a 4.6 per cent gain while sales at new car dealers rose 3.5 per cent and gas stations were up 2.3.
Sales at building material and garden equipment and supplies dealers increased 6.6 per cent.
Clothing and clothing accessories stores were up 4.4 per cent.
Sales at sporting goods, hobby, book and music stores rose 3.1.
Food and beverage stores edged down 0.1 per cent in March, due primarily to a 4.7 per cent decline at beer, wine and liquor stores.
Retail sales declined for a second consecutive month at furniture and home furnishing stores, falling 0.9 per cent in March.
Newfoundland and Labrador had the highest growth rate among the provinces at 3.1 per cent.
Monday, April 26, 2010
Liberal Democrats pledge to outlaw unfair bank charges
The Liberal Democrats today vowed to put an end to unfair bank charges and help consumers claim their money back.
In its 'manifesto for consumers', the party said it wants to stop banks from charging customers unfairly for going over their overdraft limit or bouncing a cheque.
Bank charges have been the source of great debate between the Office of Fair Trading (OFT), consumer help groups and the banking industry over the past few years. And it has taken three court cases to reach the decision that overdraft charges are a clearly advertised part of the price levied by banks for providing account services, and that the OFT has no authority to judge whether these charges represent value-for-money.
This means banks can continue to charge consumers fees of around £20 - £30 if they exceed their overdraft, even if they only go over by a few pence.
Nick Clegg said today that banks should not be able to ‘profiteer’ from consumers making small mistakes.
He said that although banks should be able to pass on the costs they incur when dealing with these problems, it is not right customers are charged hundreds of pounds for accidently going overdrawn by a small amount.
Clegg has also called for banks to pay back the money they took from their customers in unfair charges, claiming if they had a ‘shred of moral decency’ they would never have imposed these charges or refused to pay them back.
He said: ‘Together Barclays, Lloyds, HSBC and RBS have given out more than £7bn in bonuses in the last year alone. How can they refuse to return a few hundred pounds they wrongly took from people struggling to make ends meet from week to week?’
The Liberal Democrats also want to introduce policies to:
•Put a cap on interest rates charged by credit cards and store cards
•Introduce fair energy charging so that the essential, energy you use is cheapest
•Cut rail fares
•Regulate the parking system and stop private sector wheel-clamping
•Introduce up-front pricing for airlines and put an end to unfair fees
•Regulate supermarkets to ensure fair local competition
The party claim these measures will help put a stop to 'rip-off Britain'.
In its 'manifesto for consumers', the party said it wants to stop banks from charging customers unfairly for going over their overdraft limit or bouncing a cheque.
Bank charges have been the source of great debate between the Office of Fair Trading (OFT), consumer help groups and the banking industry over the past few years. And it has taken three court cases to reach the decision that overdraft charges are a clearly advertised part of the price levied by banks for providing account services, and that the OFT has no authority to judge whether these charges represent value-for-money.
This means banks can continue to charge consumers fees of around £20 - £30 if they exceed their overdraft, even if they only go over by a few pence.
Nick Clegg said today that banks should not be able to ‘profiteer’ from consumers making small mistakes.
He said that although banks should be able to pass on the costs they incur when dealing with these problems, it is not right customers are charged hundreds of pounds for accidently going overdrawn by a small amount.
Clegg has also called for banks to pay back the money they took from their customers in unfair charges, claiming if they had a ‘shred of moral decency’ they would never have imposed these charges or refused to pay them back.
He said: ‘Together Barclays, Lloyds, HSBC and RBS have given out more than £7bn in bonuses in the last year alone. How can they refuse to return a few hundred pounds they wrongly took from people struggling to make ends meet from week to week?’
The Liberal Democrats also want to introduce policies to:
•Put a cap on interest rates charged by credit cards and store cards
•Introduce fair energy charging so that the essential, energy you use is cheapest
•Cut rail fares
•Regulate the parking system and stop private sector wheel-clamping
•Introduce up-front pricing for airlines and put an end to unfair fees
•Regulate supermarkets to ensure fair local competition
The party claim these measures will help put a stop to 'rip-off Britain'.
Tuesday, March 30, 2010
Friday, March 19, 2010
Student loan reform shares health care fate
When the House votes on a health care package this weekend, it will also consider a proposal to make federal government the one-stop-shop to get cheap student loans.
However, a review by Congress' budget arm found the revised proposal will have less in new overall savings on student loans over 10 years -- $61 billion vs. the original $87 billion -- primarily because so many schools have already adopted the program.
About $10 billion of those savings would go to offsetting the deficit -- including the cost of extending health care to millions of uninsured Americans.
The student loan proposal, which cuts out bank middlemen who now collect a subsidy to make federally backed student loans, would still provide $51 billion in new funding to invest in higher education, proponents said.
"What we have is a miraculous opportunity," said Secretary of Education Arne Duncan on Thursday. "Simply by stopping the subsidy to banks, we can plow those savings into our students."
The original House legislation also directed $10 billion in savings to deficit reduction. But that was when student loan savings was predicted to reach the $87 billion mark, before the Congressional Budget Office's revision.
The private student loan industry, which has opposed the student loan legislation, is crying foul, saying the government shouldn't redirect money from student loans to extend health care to the uninsured.
Student impact
"They're using student loan borrowers to fund health care reform, and that certainly was never intended," said Kevin Bruns, executive director for America's Student Loan Providers.
If the proposal passes, private banking companies such as Sallie Mae will no longer be able to make federally backed loans, such as Stafford loans, which offer the lowest interest rates because the federal government assumes the default risk.
The move would save money by ending bank subsidies and allowing the government to keep income earned on the spread between making and issuing the loans that banks now pocket.
Low-income students would benefit the most, as the government would have more dollars available to make more need-based Pell grants in the future.
The proposal would increase maximum Pell grant awards to $5,900 by 2020, up from $5,300 now. Yet, the new maximum is $1,000 less than the $6,900 originally proposed by the House last fall.
Additionally, the federal government is facing a shortfall next year in funding for the Pell grant program, as more students with unemployed or underemployed parents have been qualifying for the need-based awards. If nothing is done, students could face a 60% cut in need-based grants, Democrats said.
Under this legislation, the Pell grant program would get $13.6 billion more next year. But it would still face a $5.5 billion gap in funding for next year. The shortfall means that the maximum Pell grant award is set to dip to $5,100 next year to meet the increased demand.
Sen. Tom Harkin, D-Iowa, pledged that Congress would continue working on how to plug Pell grants shortfalls later.
"This bill is not as good as it originally was," said Mark Kantrowitz, a financial aid expert and publisher of FinAid.org and FastWeb.com. "It is difficult to see how President Obama will be able to meet his college graduation goals by 2020."
Consumer advocates say most students that seek federally backed student loans won't notice a difference in getting loans, since financial aid offices would continue to work as the intermediary and many offices already administer direct federal government loans.
But banks and some Republican lawmakers predict the legislation will cause delays and disruptions in processing student loans, saying the federal government doesn't have the manpower to take over the high volume of loans now originated by the private sector.
The banks also predict that thousands of jobs will be lost in the private student banking industry, including 2,500 at Sallie Mae (SLM, Fortune 500), said company spokesman Conwey Casillas.
The stakes are high, because federally backed student loans are the single most common way students finance higher education. It's a core product for student loan giant Sallie Mae, which also sells students its own private loans at higher interest rates.
As the result of the negotiations, one state is poised to receive special treatment and will continue making federally backed student loans, costing the taxpayers $50 million.
However, a review by Congress' budget arm found the revised proposal will have less in new overall savings on student loans over 10 years -- $61 billion vs. the original $87 billion -- primarily because so many schools have already adopted the program.
About $10 billion of those savings would go to offsetting the deficit -- including the cost of extending health care to millions of uninsured Americans.
The student loan proposal, which cuts out bank middlemen who now collect a subsidy to make federally backed student loans, would still provide $51 billion in new funding to invest in higher education, proponents said.
"What we have is a miraculous opportunity," said Secretary of Education Arne Duncan on Thursday. "Simply by stopping the subsidy to banks, we can plow those savings into our students."
The original House legislation also directed $10 billion in savings to deficit reduction. But that was when student loan savings was predicted to reach the $87 billion mark, before the Congressional Budget Office's revision.
The private student loan industry, which has opposed the student loan legislation, is crying foul, saying the government shouldn't redirect money from student loans to extend health care to the uninsured.
Student impact
"They're using student loan borrowers to fund health care reform, and that certainly was never intended," said Kevin Bruns, executive director for America's Student Loan Providers.
If the proposal passes, private banking companies such as Sallie Mae will no longer be able to make federally backed loans, such as Stafford loans, which offer the lowest interest rates because the federal government assumes the default risk.
The move would save money by ending bank subsidies and allowing the government to keep income earned on the spread between making and issuing the loans that banks now pocket.
Low-income students would benefit the most, as the government would have more dollars available to make more need-based Pell grants in the future.
The proposal would increase maximum Pell grant awards to $5,900 by 2020, up from $5,300 now. Yet, the new maximum is $1,000 less than the $6,900 originally proposed by the House last fall.
Additionally, the federal government is facing a shortfall next year in funding for the Pell grant program, as more students with unemployed or underemployed parents have been qualifying for the need-based awards. If nothing is done, students could face a 60% cut in need-based grants, Democrats said.
Under this legislation, the Pell grant program would get $13.6 billion more next year. But it would still face a $5.5 billion gap in funding for next year. The shortfall means that the maximum Pell grant award is set to dip to $5,100 next year to meet the increased demand.
Sen. Tom Harkin, D-Iowa, pledged that Congress would continue working on how to plug Pell grants shortfalls later.
"This bill is not as good as it originally was," said Mark Kantrowitz, a financial aid expert and publisher of FinAid.org and FastWeb.com. "It is difficult to see how President Obama will be able to meet his college graduation goals by 2020."
Consumer advocates say most students that seek federally backed student loans won't notice a difference in getting loans, since financial aid offices would continue to work as the intermediary and many offices already administer direct federal government loans.
But banks and some Republican lawmakers predict the legislation will cause delays and disruptions in processing student loans, saying the federal government doesn't have the manpower to take over the high volume of loans now originated by the private sector.
The banks also predict that thousands of jobs will be lost in the private student banking industry, including 2,500 at Sallie Mae (SLM, Fortune 500), said company spokesman Conwey Casillas.
The stakes are high, because federally backed student loans are the single most common way students finance higher education. It's a core product for student loan giant Sallie Mae, which also sells students its own private loans at higher interest rates.
As the result of the negotiations, one state is poised to receive special treatment and will continue making federally backed student loans, costing the taxpayers $50 million.
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